Pa. may pull back on funding for redevelopment projects

HARRISBURG — Pennsylvania’s most sweeping economic development programs could see a limited spending cap and permanent guidelines under a recently passed proposal.

The state’s Redevelopment Assistance Capital Program (often called “R-Cap”) provides grants with borrowed money for private projects pursued by municipalities and local agencies.

That could include hospital expansions, parking garages or community centers — any project with a cultural, civic or historical connection that could create jobs and be tied to economic development.

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But the program is often criticized as a questionable source of ballooning debt. RACP’s debt ceiling is $4.05 billion, about 10 times what it was when it was created in 1986.

Since then, it’s financed thousands of projects, some of which are called out as government pork, like the construction of the Arlen Specter Library at Philadelphia University and the John P. Murtha Center.

A proposal recently passed by the House of Representatives would instantly lower RACP’s debt ceiling by $600 million. It would also codify tighter requirements for project approval, tied to scope of the project and job creation. Such requirements were put in place last year by Gov. Tom Corbett’s administration, while simultaneously reducing the amount of annual grants to $125 million a year.

The legislation passed the House with a nearly unanimously vote.

Bill sponsor state Rep. Matt Gabler, R-Elk, said the goal is to make the program sustainable – and transparent. Putting RACP approval guidelines into law will allow the public to see if lawmakers are playing by the rules when approving projects, Gabler said.

“In our role as legislators, it’s our appropriate role to conduct oversight of the executive branch, to put those requirements into law that we believe are good practices,” Gabler said.

Gabler said his bill would not change the purpose of RACP, or address the types of projects that can be approved. But it would, he said, add “appropriate constraints.”

To receive RACP grants, projects must have a total cost of $1 million, and carry a minimum 50 percent local match.

Corbett announced the first round of RACP in his administration in early February. The 54 projects include small-scale investments like $500,000 for floor renovations in Allentown’s Sacred Heart Hospital and $1 million toward a parking garage in Labtrobe. Others are more expensive, and more global, such as the $5 million for Philadelphia Energy Solutions and another $5 million for Braskem America toward its Marcus Hook splitter project.

Gabler’s bill now heads to the Senate, and House Majority Leader Rep. Mike Turzai, R-Allegheny, said he plans on seeing the proposal discussed along with the annual budget as “one of the items we bring to the negotiating table.”

Last year, the Republican-controlled Senate did not pass a similar bill which would have immediately lowered the program’s ceiling by $500 million, along with a long-term drop off to capping the program at $1.5 billion. But it contained the same program guidelines eventually adopted by the administration.

Senate Majority Leader Dominic Pileggi, R-Delaware, said the House RACP proposal includes a number of “common sense” reforms, including a focus on major projects, greater transparency and fair geographic distribution.

He said he fully expects the Senate to discuss the proposal, picking up where they stalled last year.

“Where we failed to reach an agreement last time was on some of the specific permitted uses for the RACP funds and the amount that could be spent under the program under the governor’s discretion,” Pileggi said. “I expect that conversation will continue.”

But no matter what lawmakers believe is the right way to use RACP, the ultimate decision rests with the chief executive.

Pileggi said Corbett’s recent announcement on funded projects will help further the discussion by giving specific examples of how RACP is used in this administration.

“Although this legislation would put some stricter parameters on the executive’s exercise over that decision, it still leaves very, very broad discretion with the governor,” Pileggi said. “I think the best way to examine that is to look at the projects that the governor recently announced.”

Pileggi said he thought the recently approved projects represent “a good use of taxpayer dollars.”

The latest round of RACP projects approved by the Corbett administration involve 54 projects in 28 counties. Total job creation is estimated at more than 56,000 jobs. State contributions total $125 million, yielding an average state investment of about $2,232 per job created, not counting the local match.

Some lawmakers seem wary of lowering the spending cap at a time when the state is clamoring to create jobs. Pennsylvania’s unemployment rate, 7.9 percent as of December, is just a hair above the national average of 7.8 percent.

Senate Appropriations Minority Chair Sen. Vincent Hughes, D-Philadelphia, said lawmakers should look at RACP to make sure funds are being used appropriately. But, he added, the significant reduction of RACP grants in the Corbett administration is hindering job creation.

Hughes said RACP can be used in concert with other economic development tools to put people to work and turn around distressed communities.

“It can be a pot of dollars which are last resort dollars for many important projects in many distressed communities across the state,” Hughes said.

“We need to look at that and make sure it is being utilized appropriately and at the appropriate level.”